A Fresh Look at O'Reilly Automotive (ORLY) Valuation Following Buyback Boost and Strong Quarterly Growth

O'Reilly Automotive (ORLY) is making headlines this week after announcing a $2 billion boost to its share buyback program. The company is extending the plan for another three years. Investors are watching closely, as buybacks like this can impact share value over time.

See our latest analysis for O'Reilly Automotive.

After announcing a major boost to its stock buyback plan, O'Reilly Automotive has continued its momentum with strong quarterly results and ongoing community initiatives. The shares have recorded a 28% year-to-date gain, while the 1-year total shareholder return stands at 22%, highlighting a pattern of long-term momentum despite some short-term volatility.

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Yet with the stock rallying strongly and trading near its price target, investors may be wondering whether O'Reilly shares still offer room to run, or if the market has already priced in its next stage of growth.

Most Popular Narrative: 7.7% Undervalued

O'Reilly Automotive's most watched narrative sets a fair value above its last close, pointing to expected gains if forecasts materialize. With analyst projections fueling the outlook, all eyes are on key earnings and revenue drivers that could tilt the scale.

O'Reilly's strategic emphasis on inventory and distribution capabilities, including a plan to increase average inventory per store by 5% in 2025, positions the company to maintain high availability and service levels. This may lead to sustained or increased revenue growth. The company is maintaining its strategy of sourcing diversification by reducing reliance on Chinese products to mitigate tariff impacts, which can help stabilize gross margins by decreasing future cost pressures.

Read the complete narrative.

Want to know which bold supply chain moves might unlock this premium? Buried within the narrative are a few striking growth levers, plus one forecasted margin improvement that is not what you would expect for a retailer. Curious how these underpin the fair value? Read on and decide for yourself.

Result: Fair Value of $110.00 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, unexpected shifts in tariffs or rising competition could pressure O'Reilly's profit margins and challenge the current growth outlook.

Find out about the key risks to this O'Reilly Automotive narrative.

Another View: What Do Market Multiples Say?

Looking through the lens of price-to-earnings, O'Reilly trades at 34.5x, which is notably higher than both the US Specialty Retail industry average of 18x and the average of its peers at 32.4x. The company also sits well above its fair ratio of 19.2x. This premium suggests investors are paying up for projected growth and competitive advantages, but it leaves less margin for error if expectations change. Is the market being too optimistic, or could this confidence prove justified?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own O'Reilly Automotive Narrative

If you want to see the numbers in a new light or test your own theory, you can build a narrative around O'Reilly's results in just a few minutes. Do it your way

A great starting point for your O'Reilly Automotive research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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